CASH BACK & DECORATING ALLOWANCES ON NEW BUILDS — WHAT BUYERS MUST KNOW
- johnathanmcquoid
- Jan 17
- 2 min read
When the real estate market cools, developers often offer incentives like cash back, decorating allowances, or upgrade credits to attract buyers.
While these incentives sound appealing, they can impact your mortgage financing — and many buyers (and even some realtors) are not aware of how this works.
If you're considering a new build or pre-sale purchase, here’s what you need to know 👇
🏗️ Before you sign anything, set up your team
Always have BOTH:
✔️ your own real estate agent
✔️ your mortgage professional
Do not rely solely on the developer’s sales representative. Their job is to sell units — not to protect your financing or legal interests.
📄 What happens when you sign a pre-sale contract?
At the sales centre, you’ll be asked to sign a contract. After signing, you typically get a rescission period (cooling-off period) where you can back out.
After that period ends and conditions are removed:
✔️ you are locked in
✔️ your deposit becomes non-refundable
✔️ you must follow the developer’s deposit schedule
Deposits are often 20% of the purchase price, paid in stages throughout construction.
If you can’t complete the purchase later — you risk losing your entire deposit.
This is why your realtor MUST review the contract, the disclosure statement, the build schedule, GST, the deposit structure, and any incentives before you commit.
💸 How incentives affect your mortgage approval
This is where buyers get caught off guard.
Cash back and decorating allowances reduce the lender’s “mortgage value” of the property — even though they do NOT reduce the actual purchase price you pay.
Here’s an example 👇
A new build sells for:
$800,000 (including GST)
The developer offers a:
$20,000 decorating allowance
For mortgage purposes, the lender subtracts the incentive:
$800,000 – $20,000 = $780,000 lender value
So the lender will base your financing on $780,000, NOT $800,000.
What does that mean for you?
You must come up with the extra $20,000 in cash at closing.
The incentive sounds like a “bonus,” but you ARE paying for it — just in a different way.
💰 What if the developer offers actual cash back?
Even if you receive cash back at completion, the lender still reduces the mortgage value by that same amount.
The bank will not lend on the full advertised price — no matter what the developer promises.
This is why it’s critical to speak with us BEFORE signing anything.
💡 Final Thought
New-build incentives can be great — but they must be understood clearly.
Without proper guidance, buyers can end up short on closing funds or lose their deposits.
Before entering a pre-sale or accepting any incentive, message The Frontline Mortgage Group.
We’ll review the contract, calculate the true financing numbers, and make sure you’re protected from unexpected costs. 💬